Reshoring software development

Is the End in Sight for the Offshore Software Outsourcing Era?

Outsourcing – the word that once struck fear into the hearts of office workers – has become a cornerstone of today’s globalized economy. In the 90s and early 2000s, Indian software companies made a name for themselves in the US, opening the doors to a wealth of international talent. And now, Forbes reports that American companies outsource over one-third (37%) of IT-related tasks to offshore providers.

So why, then, has there been such a resurgence in software reshoring? Custom software development is now following the same trend we’re seeing in manufacturing—favoring local labor over complicated multi-country supply chains. We’ve had an influx of requests from clients wanting to transfer their software projects from overseas back to the US, and today, we investigate why.

The Potential Downsides of Offshore Software Development

While there is undoubtedly a time and place for offshoring, the vast majority of business owners no longer see it through rose-colored glasses. Here are some of the most common concerns we hear from experienced outsourcers in the software space.

Communication Breakdowns

It is incredibly easy to experience a communication breakdown when outsourcing to developers who speak English as a second or third language. Linguistic and cultural barriers may lead to misunderstandings that reduce clarity between speakers. Unclear instructions deliver unproductive work, which eventually warrants revision and creates project delays.

Combine language barriers with a lack of in-person interaction, and you have a recipe for communication disaster. In 2023, researchers at Yale confirmed that the brain is significantly less engaged during a video call than in an in-person conversation. This effect is amplified when cameras are turned off, and people are surrounded by distractions.

Time Zone Tug-of-War

Collaboration isn’t easy when your team is in a distant time zone. Agile development – the project management style of choice in the software industry – thrives on real-time feedback. This becomes nearly impossible for teams on different sides of the world. It introduces extensive back-and-forth communication and negates the practicality of daily standups.

When your entire developer team resides far away, work becomes asynchronous. It leaves less space for spontaneity and more room for error. Meetings at unusual hours can threaten concentration and productivity or disrupt the work-life balance of a developer team. This can have a knock-on effect on quality and timeliness.

The Overpromise-Underdeliver Cycle

Competition among offshore custom software development teams can be fierce. Bidding wars can cause developers to lower their prices so much that quantity becomes more important than quality, burning out dev teams and forcing them to cut corners. In the end, clients receive sub-par quality programming.

This issue is exacerbated by a lack of accountability from far-flung remote teams. The consequences of delivering poor work seem distant when you’ve never met your clients face-to-face or built much of a relationship with them. When an offshore partnership turns sour, it can be complicated to resolve disputes or even get the code you paid for already.

IP and Security Concerns

All countries have unique intellectual property laws—and different levels of enforcement. Hiring an offshore development team without an adequate IP agreement subjects you to considerable financial and security risks. Leaked information and pirated software can hurt your business in more ways than one. And taking legal action is never easy.

It’s almost impossible to correct a stolen IP or compromised security overseas. International lawsuits quickly become complicated and expensive, and you may not always prevail, thanks to ambiguous IP laws. Such loose regulations may leave loopholes around software ownership that could leave you with long-term losses.

Hidden Costs

Costs have always been the leading factor when comparing onshore vs offshore tech. Businesses in the US often pay significantly less for outsourced software development than they would for a local team. According to Toptal, software developers in North America charge an average hourly rate of $77. In contrast, those in the Asia-Pacific only charge $28.

However, low offshore rates can be misleading. When you consider the delays caused by time zone differences and language barriers, offshore development could end up taking much longer and costing significantly more. Reworking projects drives the price up even more.

The Benefits of Reshoring Your IT Team

Onshore software development draws from the talent pool within your home country. In the US, that means hiring US-based developers to work alongside your internal team. Reshoring or even bringing things nearshore (Mexico, Brazil, Argentina) can help you mitigate some of the challenges of offshore software development.

  • Improved collaboration: Harvard Business School found that synchronous communication (calls, video calls) decreased by 11% when team members’ time zones were only an hour apart. The effects of reduced communication are felt hardest by collaborative industries, including software development.
  • Shared business ethos: cultural background dramatically influences one’s relationship with work. The closer proximity of onshore or nearshore developers often means smaller cultural gaps and a shared understanding of workplace requirements and expectations.
  • Accountability: being closer to your developer team allows for more regular check-ins and real-time communication that increases transparency. Troubleshooting is easier for complex projects, and if things go wrong, you are protected by a familiar legal landscape.

Know When to Use Onshore vs Offshore Development

Just to be clear, we are not saying overseas app developers are inferior. Skilled programmers hail from every corner of the globe—the problem is being too far away from them. However, there are times when offshore software development may be a better choice than local hiring.

When to hire offshore developers:

  • Building APIs from a clear set of instructions.
  • Cost-sensitive projects that need a large team.
  • Software maintenance—bug fixes, upgrades, legacy system modernization, etc.

When to hire onshore/local developers:

  • Custom builds that require a deep understanding of your business.
  • When handling sensitive data—healthcare apps, banking, etc.
  • AI-driven custom software that requires iterative, real-time feedback.

Final Takeaway

Offshore software development is an excellent opportunity for all parties. On the one hand, it makes IT services accessible to businesses on a budget. On the other, it helps foreign developers build their careers. However, it has proven problematic for projects that require high levels of collaboration or follow an agile development model.

The boom of overseas IT we saw 20 years ago is gradually subsiding, and many US companies have started reshoring their tech teams. Whether this is due to communication issues, time zone delays, or general political instability, the signs are clear—local developers are coming back into style.

Zelifcam Software offers US-based custom software development and consulting. For more information, please get in touch.